Saturday, 31 March 2018

It was a broadly bearish month for world equity
markets, with net monthly changes
ranging from -6.6% (Greece), -4.1% (Australia), -3.7% (USA), -2.8% (Japan, China), -2.7% (Germany), to +0.01% (Brazil). Near term outlook offers early April weakness, but then renewed upside into the summer.

Lets take our regular look at ten of the world equity markets

*special note. Stockcharts have failed to update Japan, China, and Russia, for their last trading day of the month. The net monthly changes/settlements I've stated, take into account March 30'th.
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USA - Dow

The mighty Dow settled lower for a second consecutive month, -926pts (3.7%) at 24103, with an intra month low of 23509, which was marginally above the Feb' low. Underlying MACD (green bar histogram) cycle ticked lower for a second month. At the current rate, we will see a bearish cross in May.

Best guess: early April weakness, but then a powerful push back upward into early summer. The ultimate issue is whether the Jan' high of 26616 will be taken out, or if we put in a lower high. Right now, I'm still guessing we do break a new historic high. However, some of the other world markets are provisionally suggestive the giant rally from 2009 is complete.

The March settlement was above the key 10MA at 23524, so under my criteria, we avoided a bearish monthly close by around 2%. In April, key rising trend will be around 23k. Any price action (even if briefly) <23k from April onward, would be confirmation that the rally from early 2016 is complete.
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Germany – DAX

The economic powerhouse of the EU - Germany, saw the DAX settle lower for a second consecutive month, -339pts (2.7%) at 12096. This was the second monthly close under the key 10MA, and does merit provisional alarm bells. Note the MACD cycle, we have a bearish cross, as mid/long term price momentum now outright favours the equity bears. Further, note the lower macd cycle high in Jan'2018 to May 2015. This is pretty bearish, and warns that the grand rally from 2009 might have concluded.

Note the upward price channel trend, from April onward, support will be around 11300. Any price action <11k would be decisive, and offer a straight run to 8k. The 8000 threshold (33% lower) is of course a massively important level, as it was the giant double top for 2000/2007.

Japan – Nikkei

*chart not finalised. The Nikkei fell for a second month, -614pts (2.8%) at 21454. This was a clear 1100pts above the intra month low, and avoided a settlement under the key 21k threshold. Underlying MACD is due a bearish cross in April or May. Provisional alarm bells if <21k, with key rising trend - from 2009, which will be around 20k in April.

China – Shanghai comp'

*chart not finalised. Chinese equities cooled for a second month, -91pts (2.8%) at 3168. This was the second monthly close under the key 10MA.Next major support is 3k. China bulls can only get confident if >3500s.

Brazil – Bovespa

The Brazilian market remains strong, settling higher for a fourth consecutive month, +12pts (0.01%) at 85365. The m/t trend from Jan'2016 remains intact. Note the key 10MA in the 75000s, which is now above the May'2008 high. Any strength in commodity prices would likely send the Bovespa >90k.

French equities cooled for a second month, with the CAC -153pts (2.9%) at 5167. The French market has become decisively stuck around 5500, and is effectively back testing the old declining trend. This was the first monthly close under the 10MA since Aug'2016. Any price action <5k from April onward would merit even louder alarm bells.

Spain – IBEX

The ugliest of the EU PIIGS (we've not forgotten about that once popular term, have we?) - Spain, fell for a second month, -239pts (2.4%) to 9600. Price structure of a bull flag has been decisively negated. Any m/t hopes of a challenge of 12k are now on hold. Instead, first support is core rising trend from 2012, which in April will be around 8500.. some 11% lower. Note the MACD cycle, we have a bearish cross, with price momentum now outright bearish (if only fractionally). Further, note the lower macd cycle high of Oct'2017, relative to April 2015.

The next recession - whenever that might be, will see dormant/suppressed problems arise once more. We will no doubt see a renewed attempt by the Catalonians to break away from their Madrid masters. I have to wonder whether the political elite in Brussels are prepared for such an event, or just oblivious to what is arguably inevitable.

Australia - AORD

Australian equities cooled for a third consecutive month, with the AORD lower by a rather powerful -248pts (4.1%) at 5868, notably below the key 10MA. Soft support in April is another 5% lower around 5600. It is one market that is especially supportive of the view of early April weakness.

Greece

Greek equities settled lower for a second month, -55pts (6.6%) at 780. The March close was below the key 10MA, but the m/t trend from Feb'2016 remains intact. Its merits some reflection, that the Greek market is currently -85.4% below the Nov'2007 high of 5346. The country remains an economic basket-case, with insane amount of debt - around $400bn, relative to its population of around 11 million.... roughly $36000 per citizen. Not. Sustainable.

A broadly bearish month for world equities, with nine markets net lower, whilst the Brazilian market was fractionally higher.

Six markets saw bearish monthly closes under their respective key 10MA. Of those, three (Germany, China, Spain) settled below the 10MA for a second month.

The US, Japanese, and Brazilian markets remain resilient.
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The ultimate question: Is the giant rally from 2009 over?

Right now, there isn't remotely enough to declare that. We do have provisional alarm bells in a fair number of markets, but most of those are still holding the long term upward channel from 2009/12

A reader recently asked me, what would turn me bearish?

Technicals

-A monthly close under the 10MA, not just for the US market, but the majority of other world markets.

-A key lower high. For the US, the market maxed out in Oct'2007, an initial wave lower to Jan'2008, and then a bounce to May'2008, notably failing at the key 10MA. That amounted to eight months. So even if you assumed Jan'2018 was the high, maybe we won't have a key lower high until around this August?

Fundamentals

-GDP multi-quarter decline in growth... not necessarily having to be negative. GDP is a very laggy econ-data point, and it often takes 6-9 months to see revised data that actually gives clarity that the economy is falling into recession.

-ISM/PMI data. This data - especially Chicago PMI, I hold as second only to GDP. Further, the data is monthly, and arguably far less skewed. For now, the ISM/PMI data are well above the key recessionary threshold of 50.0.

-miscellaneous issues. In 2007, there were plenty of rather obvious warnings of economic trouble, such as bank failures. For yours truly, the finest example was the Northern Rock Bank, UK, in Sept'2007, where there were literally queues of people struggling to withdraw funds/close accounts, just a few streets from my apartment.

We have some provisional technical warnings in a number of world markets. Fundamentally though, there is near zero sign of a recession. Further, in addition to the correctly anticipated March hike, I still expect a June rate hike, which by definition, is a sign that the economic/market train will remain on the tracks into the summer.
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Thursday, 29 March 2018

US equity indexes closed significantly higher, sp +36pts (1.4%) at 2641.
The two leaders - Trans/R2K, settled +2.0% and +1.0% respectively. VIX settled -12.7% at 19.97. Near
term outlook offers another rollover next week, the only issue is
whether a daily close under the sp' 200dma.

sp'daily5

VIX'daily3

Summary

The market opened moderately higher, but the gains were shaky, and the Nasdaq even turned briefly negative. There was renewed upside that took the market to significant gains into the mid afternoon. The closing hour was naturally rather mixed, swinging from an intra high of 2659 to settle at 2640, notably well above the key 200dma.

With higher equities, volatility was crushed, with the VIX settling (if fractionally) under the key 20 threshold. The last five days of price action in the VIX threaten a bull flag, with a corresponding bear flag in equities. That does merit consideration for next week.

The March settlement...

The sp' settled net lower by -72pts (2.7%). Relative to February, we saw a lower high, but the March low of 2585 was well above the Feb' low. The settlement of sp'2640 is 44pts above the key 10MA of 2596. So, whilst we saw a second consecutive net monthly decline, it was not a bearish monthly close. Underlying MACD (blue bar histogram) cycle ticked lower for a second month, and a bearish cross is due in May. If we're to avoid that... the bulls are likely going to need to see the market back in the 2800s.

Wednesday, 28 March 2018

US equity indexes closed fractionally mixed, sp -7pts (0.3%) at 2605.
The two leaders - Trans/R2K, settled +0.1% and u/c respectively. VIX settled +1.6% at 22.87. Near
term outlook offers further chop to conclude the month. If the 200dma is lost, there is a viable 5% of further 'trap door' downside.

sp'daily5

VIX'daily3

Summary

US equities opened a little choppy, saw an early low of 2593, and then battled upward to 2632. The gains were always shaky though, and the market saw renewed choppy cooling into the close. The market feels very weak, and a break of the 200dma appears increasingly probable. On balance, its more viable early next week than tomorrow.

With equities still leaning on the weaker side, volatility picked up (intra high 24.95), with the VIX settling in the upper 22s. If the market spirals lower on a break of the 200dma, then big VIX target would be 29/30.

Tomorrow is Thursday

Yes, Thursday obviously follows Wednesday. The issue I wish to highlight is that Thursdays do tend to favour the equity bears. Tomorrow will be complicated by the fact it is not just the end of the week, but the month and quarter. Its been a very mixed month, and as things are, its going to be a second month for the equity bears.

Even if tomorrow ends on a somewhat positive note, I'm still concerned we'll see a daily close under the 200dma in early April, with a washout to the legacy gap of sp'2474/61. Q1 earnings should come in broadly superb, and that would be the natural excuse for renewed upside.
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Bonus chart: Germany, monthly

I'd guess that Germany is also closed on Friday, so there is likely just one trading day left of the month. Clearly, the DAX is set for a bearish monthly close under the key 10MA. This does merit as an alarm bell. I'll cover the world markets in the weekend post.

Tuesday, 27 March 2018

US equity indexes closed significantly lower, sp -45pts at 2612 (intra
high 2674. The two leaders - Trans/R2K, settled -1.8% and -1.9%
respectively. VIX settled +7.0% at 22.50. With bearish engulfing candles all over the place, near
term outlook threatens a break of the Friday low... which has already
happened in the Nasdaq comp', Trans, and R2K.

sp'daily5

VIX'daily3

Summary

US equities opened somewhat positive, and built gains to 2674. There was a latter day very significant swing lower, with the market in free fall in late afternoon, lead lower by the Nasdaq. With bearish engulfing daily candles for the Nasdaq comp, R2K, and
Transports, it bodes for further weakness for the Dow and sp'500 tomorrow/Thursday.

VIX saw a morning break under the key 20 threshold, but it didn't hold for very long, and the VIX settled the day in the mid 22s. It could be argued s/t price structure is a baby bull flag. If correct, the 25/26s would likely be seen within 1-3 trading days.

So much for the 'provisional floor'.

Yesterday's gains were indeed powerful, but they've effectively been fully negated today, in three of the six main indexes.

Right now, the most bearish case is another 5% lower in the main market, to around the sp'2475/50 zone. Its notable there is one remaining legacy gap from Sept'11th 2017 of 2474/61. Even if that is briefly seen, I still expect subsequent new historic highs in another multi-week up wave, but it would viably be the last wave of the grand rally from March 2009. Such a final wave would put in a monstrously clear divergence between actual price, and underlying price momentum - as seen on the bigger weekly/monthly charts.

As things are, with two trading days left of the week/month/quarter, the bears are seizing control.There are other issues of course, not least how other world markets will settle the month. Right now, its still rather mixed, but with a notably weak German and Chinese market. Today's US weakness will likely carry across to Asia/Europe, and that sure won't help the monthly settlement levels.
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Monday, 26 March 2018

US equity indexes closed very significantly higher, sp +70pts (2.7%) at
2658. The two leaders - Trans/R2K, settled higher by 2.1% and 2.2%
respectively. VIX settled -15.4% at 21.03. Near term outlook offers further upside across the remaining three
days of the week/month/Q1.

sp'daily5

VIX'daily3

Summary

US equities opening significantly higher, which was very impressive considering the moderately mixed Asian/European markets. There was some cooling from 2639 to 2617, but then the buyers appeared, with upside carrying across into late afternoon.

Volatility was naturally under pressure from the open, with the VIX settling in the low 21s. Its notable we have a long way to go, just to reach the mid teens.

Normal service resumes

The mainstream largely attributed today's gains to 'trade tensions ease'. Really? So.. err... what changed in US/international trade policy since last Friday? The answer of course is... nothing. Its just typical mis-atttribution at its finest. Cyclically, we were clearly s/t oversold, and due another up wave from the key 200dma. Its nothing much more complicated than that.

Ohh, and as for Facebook, its arguably washed out, having filled the 156/55 gap, and rebounding from around psy'150.
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The obvious question is.... was last Friday a key low?

Last Friday does merit as a provisional floor, but I'm aware some of the more adept wave counters out there are seeking one final flushout. The situation is analogous to the gains of Feb'6th, with the 8th seeing another rollover, with a capitulation and hyper spike low - from 2532 on Feb'9th.

If Tuesday also settles net higher, it will arguably fully confirm that last Friday was a key marginally higher low, from just above the 200dma.
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Saturday, 24 March 2018

It was a second consecutive bearish week for US equity indexes,
with net weekly declines ranging from -6.5%
(Nasdaq comp'), -5.9% (sp'500), to
-4.7% (NYSE comp'). Near term outlook offers a marginally higher low, relative to the Feb' low.

Lets take our regular look at six of the main US indexes

sp'500

The sp'500 saw a Monday high of 2741, but settled the week on a very bearish note, net lower by -163pts (5.9%) at 2588, having effectively tested the 200dma. Note the lower bollinger at 2536, which is just 4pts above the Feb' low. Underlying MACD (blue bar histogram) is the lowest its been since Feb'2016

To be absolutely clear, this is a very borderline situation. Either the market reverses from around current levels, or the Feb' low is going to be taken out, and that would offer further downside to (at least) the mid/low 2400s. My guess is that we do battle back upward. Earnings and econ-data are certainly supportive of such a view. Other world markets are a concern though.

Right now, the most bullish outlook is the original big target of the 2950/3047 zone. Clearly, even if the trend does resume upward, that will take some months to be seen.
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Nasdaq comp'

Tech lead the way lower this week, settling -6.5% at 6992. Indeed, the weekly close under the 7k threshold justifiably caught some mainstream attention. Note the Feb' low of 6630, which is close to the lower bollinger. On balance, the Nasdaq shouldn't break <6600.

Dow

The mighty Dow settled -1413pts (5.7%) to 23533. Keep in mind the Feb' low of 23360. Underlying MACD (blue bar histogram) cycle is the lowest its been since October 2008, which is pretty incredible to reflect upon. The VIX certainly isn't reflective of such cyclical weakness, and does give credence to the notion that the Dow will resume back upward across the spring.

NYSE comp'

The master index settled -4.7% at 12177. A break <12k would offer 11250/11000. Whilst there is currently zero sign of a floor/turn, I don't expect any sustained price action <12k into end month.

R2K

The second market leader - R2K, settled -4.8% at 1510. Its notable that last week saw the R2K almost follow the Nasdaq comp', coming close to breaking a new historic high. Right now, first big support is 1500/1490s. The Feb' low of 1436 still looks set to remain intact.

Trans

The 'old leader' - Transports, saw a net weekly decline of -520pts (4.9%) to 10163. The Feb' low of 9806 is still another 2% lower. Cyclically, the tranny is on the very low end.
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Summary

A very bearish week, with all six of the main indexes rather powerfully lower.

Weekly price momentum for the Dow is at the lowest level since Oct'2008, although that is not being confirmed via the VIX.

The week settled at the lows, and there is currently zero sign of a floor/turn.

Best guess: renewed upside across the spring/early summer, but that (overly bullish?) outlook would have to get dropped if the majority of indexes break the Feb' low, and see a weekly close under. As many now recognise, how next week trades and settles, will be massively important. The fact it will be end month and Q1, merely make it even more important.
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The monthly settlement

sp'monthly1b

Regular readers will be well aware that I place a fair amount of importance on the monthly 10MA. That stands at sp'2590, and indeed, we're currently fractionally under it, with just four trading days left of the month. If the sp' unravels into end month, it would bode badly for the spring ahead.

For those of you who believe 2872 was the conclusion of the rally from March 2009, your natural first target should be the lower monthly bollinger, which will soon be in the 2100s. That is of course... a very long way down. The most optimistic bulls could seek the 2675/700 zone, that would still make for a net monthly decline... but nothing 'critical'. Yours truly will be very much focused on how March settles this coming Thursday.
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*there are just a few fed officials scheduled, and none will likely be of any importance.

**as the US (and most other world markets are closed for 'Good Friday'), once the econ-data is out of the way, Thursday will tend to be rather subdued. It will notably be the end of the trading month/Q1.

***UK/EU clocks move forward 1hour at 1am Sunday. Yours truly will be pleased to return back to trading hours of 2.30pm>9.00pm.
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Friday, 23 March 2018

US equity indexes ended the week very significantly lower, sp -55pts
(2.1%) at 2588 (intra low 2585). The two leaders - Trans/R2K, settled
-1.8% and -2.1% respectively. VIX settled +6.5% at 24.87. Near term outlook offers a turnaround early next week.

sp'daily5

VIX'daily3

Summary

US equities opened on a somewhat positive note, which was rather impressive after overnight borderline significant declines. The gains didn't hold long though, as every minor rally was still being sold into. Just like yesterday, there was distinct late afternoon weakness, with another ugly closing hour. The sp'500 came within a fraction of a point of tagging the key 200dma.

Volatility was higher, but only moderately, settling in the 24s. Relative to the equity weakness, the VIX is NOT indicative of any underlying capital market panic/upset. The situation IS different to late Jan/early Feb'.

Asian weakness: Japan, monthly

With five trading days left of the month, the Nikkei is -6.5% at 20617. The Friday close <21k is very bearish. If March does settle <21k, it'd merit provisional alarm bells.
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Thursday, 22 March 2018

US equity indexes closed very significantly lower, sp -68pts (2.5%) at
2643. The two leaders - Trans/R2K, settled -2.8% and -2.2% respectively.
VIX settled +30.7% at 23.34. Near term outlook threatens further weakness, although a number of key
signal stocks are highly supportive of renewed upside across the
spring.

sp'daily5

VIX'daily3

Summary

Thursdays do tend to favour the bears, with equities opening moderately lower, seeing a morning low of 2661, and then rallying to 2689, negating half of the declines. The selling resumed in the afternoon, with the market seeing an especially ugly closing hour, settling at the lows.

Volatility naturally picked up, and accelerated into the close, settling in the 23s, the highest level since March 2nd (when sp'2647).

notable market: Germany, monthly

With five trading days left of the month, the DAX is -2.7% at 12100. Note the key 10MA at 12622. Another monthly settlement under that MA would merit alarm bells for Germany, the other EU markets, and to some extent... the US.
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Wednesday, 21 March 2018

US equity indexes closed moderately mixed, sp -5pts at 2711. The two
leaders - Trans/R2K, settled -0.3% and +0.5% respectively. VIX settled -1.9% at 17.86. Near term
outlook offers upside to the gap of 2741/52, with a March settlement
>2800. More broadly, the 2950/3047 is on the menu.

sp'daily5

VIX'daily3

Summary

US equities opened fractionally choppy, and then leaned upward into the early afternoon. As expected, the fed raised rates by 25bps to a new target range of 1.50-1.75%. The sp' initially jumped to 2739, but then saw a significant swing lower to 2709. This sort of swing is to be expected for such a fed day, as the algo-bots try to trigger the short and long-side trading stops.
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Powell press conf' number one, with many to follow in the years ahead.

The VIX opened weak, and briefly turned positive in the late afternoon. Despite equities closing on the weaker side, with the uncertainly of the fed out of the way, the VIX settled lower for a second day. Single digit VIX looks on the menu this spring.
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Disclaimer: These pages (and especially all charts) are for informational purposes only. Most of the numerical data/calculations 'should' be correct. However, YOU make your own decisions as to if you think any comment or data point/chart is correct or not. All comments posted via Disqus/Google (or any other type) users may/may not be agreed with by yours truly.

I (Permabear Doomster) am not a financial advisor as officially endorsed by any national government, corporation, financial/securities regulatory authority in neither the USA, UK, or any part of the world. None of the posts/comments in these pages are intended as trading/investment advice. They are merely my opinion on where a given market/stock and any other 'instrument, index, etc' may move at any future time.